The widespread application of digital technology has brought profound changes to society, raising the issues of market order and supervision in the digital age as a result. In the digital age, market structures and operating models have undergone important changes. The unprecedented density, depth and breadth of market transactions, the complexity of transaction forms and transaction contents, as well as the rapid changes of trading rules and commercial relationships have significantly challenged the conventional market order. This in turn, has created a strong demand for a new order.
The rise of large platform companies has brought important changes to the market structure and order. Jiang Xiaojuan and Huang Yingxuan of Tsinghua University mentioned in their paper Market Order, Market Supervision and Platform Governance in the Digital Age that by the end of 2020, there were 197 digital platform companies worth more than USD 1 billion in China, an increase of 133 compared to 2015. From 2015 to 2020, the business value of digital platforms with more than USD 1 billion has increased from USD 770.2 billion to USD 3,504.3 billion, with a compound annual growth rate of 35.4%.
These platforms not only pose challenges to the market order’s status quo, because of their technical capabilities, they have also become the creators and maintainers of relevant orders in their production and consumption ecosystems. Jiang and Huang believe that technical order has become another important driver for maintaining the effective operation of the market after the spontaneous order, administrative order and legal order. At the same time, the “big and unmanageable” problem brought about by large-scale digital platforms relying on the advantages of digital technology has become a prominent problem plaguing regulators in various countries and societies.
Because of their importance before the advent of the digital age, certain big companies were touted as “too big to fail”, where the government to mildly penalize or even bail out some of them if they had a problem. In the digital age however, it is significantly more difficult to supervise these large businesses, or “too big to manage” as Jiang calls it. The primary cause is the advent of a technical order, which significantly expands the main body and transactions on the major platforms. The structure of such platforms is multi-layered and highly complex, and the business model faces frequent innovation, making them arduous to manage.
While the market economy, practiced in many countries, is able to maintain its overall effective operations, yet different countries have a significant degree of commonality when it comes to the “failure” of digital platform regulation. Jiang believes that the fundamental reason is that the important changes in technology, industrial organization and business model in the digital age have exerted extensive and strong constraints on the effective functioning of spontaneous order and institutional order, posing huge challenges to market operation.
The regulation of large platforms is a problem not uncommon across the world. Although the European Union and the United States have long had the concepts, policies and laws as their tools, they have not been able to effectively curb the market power of these large digital platforms. In recent years, the United States and the European Union are facing the increasing doubts about the capital power of such platforms being too huge. Coupled with the monopolizing of the market by tech companies, the authorities have continuously introduced regulatory policies. Nonetheless, the market value of numerous huge platforms has increased dramatically, indicating that they are particularly difficult to regulate.
Jiang and Huang believe that the reason why these platforms are “too big to manage” is that the technology and business models are complicated, while the scale is considerably large. At the same time, the administrative and legal supervision of the platform has not been properly done, so much so that they are unable to detect and effectively control the problems. Therefore, the platform supervision in the digital age is primarily to solve the prominent problem of “too big to manage”.
For the supervision of platform enterprises in the digital economy era, the regulatory policy suggestions put forward by Jiang and Huang include:
First and foremost, the government will need to strengthen supervision on these platforms to be certain that they comply with rules and regulations. Indeed, it is hard for external regulators to actively supervise each transaction on the platforms. Hence, effective institutional arrangement of the compliance management system should be set up within the companies, for the government to effectively supervise the construction, and operation of such systems. Second, there is the need to supervise the platforms by category. Each platform has commonalities, yet they have their specific features as well. Search engine platforms, e-commerce platforms, social platforms, mobile payment platforms, etc., have their characteristics and need to have individualized regulatory requirements. Third, the focus should also be on public rules and strengthen algorithm supervision. While serving the platform’s business model and platform autonomy, data and algorithms may lead to violation of personal privacy, social fairness, shape inappropriate values, etc., and even interfere in political elections through the massive data they possess. Since only the software developers know how these algorithms work, even when abuses happen they may go unnoticed by society for a long time. Fourth, fair competition between platforms should be maintained, and a balance of interests among multiple parties has to be perpetuated. Fifth, administrative supervision should be quick and timely.
Jiang and Huang believe that the market order in the digital age has changed, making it crucial to understand the change holistically. In the new order structure, it is also crucial to understand the optimal combination between various market orders and supervisions, as well as to maintain the orderly operation of the market, balance the interests of various subjects, and maximize the overall social benefits.
Chan Kung, founder of ANBOUND, believes that such views are indeed necessary to prepare ahead of time for market regulation in the digital age. However, looking at the future, the worst is probably yet to come, not to mention the regulatory aspects of it. From the perspective of the development of artificial intelligence (AI), Chan Kung emphasized that the potential of technological development has reached a stage beyond imagination. In the future, AI will be able to conduct autonomous programming, and it can do many things that are not possible for humans. The issue is, what do humans need to do after AIs advance to such a level? The answer for Chan Kung is to regulate technology.
Therefore, in the future, the whole human society will comprehensively supervise technology, rather than having only official bodies to do it. One should be conscious that, in a period of fast technological development, the future is not about “what can be done,” but rather “what ought not to be done”. If we rely solely on official supervision, then we would be making the mistake of letting the problem go out of control. One should be conscious that, in a period of rapid technological development, the future is not about “what can be done,” but rather “what ought not to be done”.
The human community or countries must insist on maintaining a “legal balance” between scientific and technological growth and the efficacy of such development. In the age of advanced technology, this legal balance is a critical fundament. For future-oriented Chinese science and technology officials, China must establish such a concept